TradeSmith Daily

May 2020

It’s Shocking How Much We Still Don’t Know About the Coronavirus

May 18, 2020John Banks

The novel coronavirus is still a mystery to us. This is surprising given the sheer amount of research and intellectual firepower being thrown at the virus worldwide. In dozens, if not hundreds of countries, doctors and scientists and researchers are working around the clock to figure out what the novel coronavirus truly is — and how it does what it does. And yet, as of now, we still don’t know how the virus really works, or what it is fully

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Are U.S. Equities the Second-Most Overvalued in History?

May 15, 2020John Banks

Are U.S. equities at their second-most overvalued point in history, behind only 1999? That is the opinion of multi-billionaire David Tepper, one of the top hedge -fund managers in the game. The U.S. equity market prior to the May 13 decline was “maybe the second-most overvalued stock market I’ve ever seen,” Tepper said in a CNBC interview this week. “I would say ’99 was more overvalued,” he added. Tepper went on to say valuations of certain Nasdaq stocks were “nuts,”

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Conditions are In Place for an “Inflationary Depression”

May 14, 2020John Banks

Robert Skidelsky, an economic historian and member of the U.K. House of Lords, believes the conditions are in place for an “inflationary depression.” On May 6, he told Bloomberg the following: This is going to be a depression and an inflation at the same time, or an inflationary depression if you like, which is very, very unusual. It’s a bit like what we had in the 1970s, when we had something called stagflation — high unemployment and inflation at the

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The Mechanics of Negative Interest Rates

May 13, 2020John Banks

Earlier this week we discussed the bond market’s ominous message, while emphasizing a forecast for negative U.S. interest rates. Scott Minerd is talking about negative interest rates, too. This is notable because Minerd, the chief investment officer for Guggenheim Investments, oversees $270 billion worth of assets. In a note published on May 10, Minerd said the following: I see the yield on the 10-year Treasury note falling to 25 basis points or lower very soon, with a possibility that it

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The Bond Market Does Not See Quick Recovery — In Fact It Sees the Opposite

May 12, 2020John Banks

There is no V-shaped economic recovery. We won’t see a U-shape, either. Instead, there is greater likelihood America’s recovery will have an L-shape — a flat crawl after a hard drop. And that’s only if we’re fortunate, and do a better job in the virus fight. If we get the next part wrong, America could wind up looking like Europe or Japan, with a descent into negative interest rates. And if we really get it wrong, we’ll face a second

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The Federal Reserve Does Not Have Magic Powers

May 11, 2020John Banks

Jerome “Jay” Powell, the Chairman of the Federal Reserve, is not a wizard, and the Federal Reserve does not have magic powers. We point this out because — based on arguments we are hearing as to why everything will be “back to normal” soon — a fair chunk of analysts and investors appear to think otherwise. Of course, they don’t spell out the “magic” part in so many words. But a popular v-shaped recovery argument relies on magical thinking just

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What’s Going on With Sweden?

May 8, 2020John Banks

While the Western world zigged, Sweden zagged. The United States, Canada, the United Kingdom, and most of Europe — including Sweden’s Nordic neighbors, Norway and Finland — issued shelter-in-place orders to deal with COVID-19. Sweden did not. Meanwhile, in country after country, the virus is wreaking havoc. And yet Sweden appears to be floating above it all. No shelter in place, no problem. How is this possible? Due to this paradox, “Be like Sweden” has become a rallying cry for

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In a Real Apocalypse, Bitcoin Beats Gold

May 7, 2020John Banks

A few weeks ago, your mild-mannered TradeSmith Daily editor did something out of character. At a private outdoor shooting range, we received tactical training instruction — from a professional firearms instructor, who is also a family friend — on the proper handling and use of a 12-gauge pump-action shotgun. The outing was fun, but the purpose was serious. We were taught how to handle the shotgun inside a house — or even in a hallway if need be. The training

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